The Austin Chronicle

The Showdown at Sixth and Lamar

By Lauri Apple, July 26, 2002, News

News that the proposed Sixth+Lamar office/retail project in West Austin will include a Borders has spurred a flood of supportive letters to BookPeople CEO Steve Bercu, whose store would be located in the shadow of the competitive book and music chain's proposed location. An e-mail Bercu recently sent to friends of the 32-year-old store was circulated to listservs about town, drawing attention to more than $2.1 million in incentives and fee waivers the project received from the city several years ago for meeting Smart Growth requirements. Back then, Sixth+Lamar was called the Austin MarketPlace, and included a Loews movie theater and a Target -- but no Borders.

Both Bercu and Waterloo Records owner John Kunz say that representatives of Sixth+Lamar developers Schlosser Development Corp. told them last year that the project would not include another bookstore. They support competition in principle, they say, but oppose incentives if used to help major national chains that will directly compete with their businesses. In recent weeks, Bercu in particular has encouraged supporters to lobby City Council not to approve transferring the Smart Growth incentives Schlosser received for MarketPlace to Sixth+Lamar, as the developer hopes. "Basically I, as a taxpayer, am subsidizing [them to put me] out of business, and so is John Kunz," Bercu laments.

Further complicating matters is that BookPeople, whose current landlord is next-door neighbor Whole Foods, could soon be paying rent to Schlosser. In April, the locally based supermarket chain gave Sixth+Lamar some needed momentum when it decided to move its headquarters into a seven-story office tower that Schlosser will build on a vacant lot across Sixth Street from the current Whole Foods location. Schlosser has until January 1, 2003, to decide whether to acquire the building, which it could then divvy up between BookPeople and a variety of retailers by modifying Whole Foods' current space. Whole Foods will move into an 80,000 square-foot store on the same block as the new office tower, which will also feature a parking garage for more than 800 cars. Schlosser expects construction to begin this year -- or February 2003 at the latest.

Schlosser also plans to develop the block directly east (across the street from GSD&M), where much of the new retail would land, including Borders. The developer also developed the southeast corner at Fifth and Lamar, which houses OfficeMax, Starbucks, and a fitness center among other things. Burned in the past by Loews (which went bankrupt last year) and other retailers that have withdrawn from the project, Brad Schlosser wouldn't discuss companies other than Borders that have expressed serious interest in Sixth+Lamar. (Best Buy, one of several chains rumored to be a prospective tenant, decided against it, said a company spokeswoman.) After carrying so much expensive land for roughly a decade without breaking ground, he's anxious to see the project under way. "Austin is our back yard too," he said. "We want to build something that Austin wants and needs." He says that his company is not trying to subvert BookPeople, particularly when he could soon become its landlord. (BookPeople's lease runs through 2015, Bercu says.) A few years ago, BookPeople had agreed to join the MarketPlace project, but backed out when that project fell through. At the time, says Schlosser, "no one complained" about Smart Growth incentives for the project's national tenants.

"Steve and John have great businesses," Schlosser said, adding that he'd still like BookPeople and Waterloo to join the project. "It's very common for retail to be clustered -- look at Waterloo and Cheapo Discs, or Schlotzsky's and Antone's. We're not trying to impede BookPeople's business, but to enhance it."

Bercu doesn't buy that argument. "They pretend to not understand that more of the same kind of business isn't necessarily good," Bercu said. Unlike two restaurants that offer different menus, for example, BookPeople and Borders sell the same products -- but as a publicly traded chain with access to capital, Borders can offer discounts well below those of its competitors, launch aggressive marketing campaigns, and even endure modest sales without going out of business. "If Borders is coming here to help us," Bercu said, "it's an interesting new wrinkle in their business plan."

The rift between Bercu and Schlosser could produce ripple effects affecting other stakeholders in the lively Sixth and Lamar corridor. Both Bercu and Schlosser principals serve on the West End Austin Alliance -- a coalition of area business owners, developers, and stakeholders that weighs in on development, transportation, and other issues. Alliance Member Perry Lorenz, who developed the new Nokonah condo complex with former city Council Member Robert Barnstone, considers himself a "loyal" BookPeople shopper and says he understands Bercu's worries, but doesn't view Borders as a threat to the local store's business. "The increase of warm bodies down there in the mood to shop, browse, and spend money will spill over to everyone's benefit," he concluded.

Whether Schlosser will request additional waivers for Sixth+Lamar is uncertain. So far, city documents show, the company has received $709,000 of the more than $2.1 million in waivers it was granted in 1998. Although some of that was applied to the Fifth and Lamar complex, Schlosser used up over $500,000 in temporary right-of-use fee waivers without building anything, which prompted a letter from Transportation, Planning and Sustainability Director Austan Librach last June. "While I understand the complexity of the project, I encourage you to minimize the amount of time that public right-of-way is closed to preserve the remaining waivers," Librach wrote.

Librach told the Chronicle that the waivers were used to erect barricades on the sidewalks of Lamar, Fifth, and Sixth streets, obstruct part of a lane on Fifth, and briefly close Bowie -- all in preparation for construction that never began. "The right-of-way [waivers] are typical" of Smart Growth projects, Librach said. "What's not typical is that it's taken so long, and now [Schlosser]'s coming back for a second bite at the apple."

Meanwhile, the Whole Foods office tower has also provoked some concern among members of the Old West Austin Neighborhood Association, which has opposed Schlosser's request from the city Board of Adjustment for a 12-foot height variance. (Last week, the Downtown Commission approved a resolution recommending the variance, which the Board plans to consider at its next meeting.) Negotiations with OWANA and other stakeholders continue, Schlosser says. Schlosser has hired high-profile attorney Richard Suttle to argue its variance request before the city.

In addition to the many letters from loyal customers, Bercu says, South Congress merchants have told him they plan to send a resolution to council opposing subsidies for chain stores. Borders' pending arrival at Sixth and Lamar has delivered a "wake-up call" to Austinites frustrated by the city's diminishing uniqueness, he says."I'm happy about that, if nothing else."

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